Standard & Poor's raised Baltimore's bond rating to its highest level in years — a move that reflects growing confidence in the city's fiscal health and will lead to potentially millions of dollars in savings for the city budget.

The city's new AA rating puts Baltimore at the same ranking as New York City and similarly-sized Nashville, Tenn.

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While the state and most county governments in Maryland have higher ratings, Baltimore's new score means it is outperforming many cities with similar demographics and wealth. A sampling of cities with similar taxable property value have only A ratings, according to an April report by the Wall Street bond rating agency.

"This is an affirmation of the economic progress the city has made in the last few years," said Mayor Rawlings-Blake. "We were able to make the tough choices necessary to return Baltimore City to balanced budgets. … Today's bond rating upgrade signifies that Baltimore City is a good place to invest."

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The mayor has made a series of decisions that have cut roughly $300 million from the $750 million long-term deficit that was projected a few years ago. The changes include requiring employees to contribute more to their pensions, reducing the size of the city's workforce and vehicle fleet and asking firefighters to work longer hours.

The new credit rating is expected to allow the city to borrow money at lower interest rates for projects such as infrastructure upgrades, new schools and improved recreation centers. That in turn would save taxpayers cash on interest payments.

The rating change will be applied to existing general obligation debt and a new $63.6 million bond issue.

Standard & Poor's credit analyst Timothy Barrett said the upgrade "reflects our opinion of the city's ... strong budgetary flexibility and liquidity due to its proactive management team and demonstrated willingness to cut expenditures." Records going back to 1997 show Baltimore with lower scores than Tuesday's, an S&P spokesman said.

Andrew W. Kleine, the mayor's budget director, said Baltimore has emerged from the recession in better fiscal health with a larger fund balance, lower property taxes and significantly less in the long-term structural deficit.

Standard & Poor's — one of the nation's three leading bond-rating agencies — analyzes the credit risk of governments and businesses based on a matrix that includes the economy, budget flexibility and performance, debt and liabilities.

A rating change has been a relatively rare occurrence. The city's last change came in 2007 when the rating jumped from an A-plus to an AA-minus. The last time the city's credit was rated AA by both Moody's and Standard & Poor's was in 1963, according to Stephen M. Kraus, chief of the city's bureau of treasury management.

Frank H. Shafroth, the director for the State and Local Government Leadership Center at George Mason University, said Baltimore's new score — and its upward mobility — signal that the city is a "very safe" place to invest. AAA is the highest rating, followed by AA and A. Rates fall in categories ranging from A to D, which is default.

"Investors will look at two things: What is the rating … and more importantly, what direction is it going? Is it improving?" Shafroth said.

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Baltimore's new rating isn't as high as those of some large cities, including Boston, which as a AAA rating. But Baltimore fares better than Philadelphia and Los Angeles, which are rated at A-plus and AA-minus, respectively.

The state of Maryland has the highest AAA rating, as do Anne Arundel, Baltimore, Carroll, Harford and Howard counties. Overall, about a third of jurisdictions in Maryland earn the highest score.

Brenda McKenzie, the president of Baltimore Development Corp., said development in the city also contributed to the rating upgrade, including the Horseshoe Casino, the Shops at Canton Crossing and the Rotunda redevelopment.